Here is the problem, the fools that say technical analysis is bunk expect it to work 100%. There is no such thing. Only Bernie Madoff claimed he placed 77 straight trades in the stockmarket and never suffered a single losing trade. If you believe that, you believe in unicorns I am sure. None of which is true. And even if you are able to trade and win 100% of the time, your trades will probably result in minuscule returns. Would you risk $100 to earn just $1 each time even if you win all your trades? If you actually, trade or invest in the stockmarket, you would know that risk is real. That you can lose 100% of your monies. In some cases, you can lose more than all your monies and still owe your broker monies. Nobody owes you anything and you better know what the hell you are doing or stay out of the stockmarket, for your own good. As anything in life, it is about the percentages. If you have a trading a edge in the stockmarket, you will come out ahead as long as you put out a number of trades to take advantage of that edge. As for technical analysis, if a chart pattern works say 48% of the time, is it useless? What if each time the chart pattern works, it returns 50% and when it does not, you only lose 10%. Is technical analysis still worthless?
TA is BS?
- Thread starter MrAgi1
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Here is the problem, the fools that say technical analysis is bunk expect it to work 100%. There is no such thing. Only Bernie Madoff claimed he placed 77 straight trades in the stockmarket and never suffered a single losing trade. If you believe that, you believe in unicorns I am sure. None of which is true. And even if you are able to trade and win 100% of the time, your trades will probably result in minuscule returns. Would you risk $100 to earn just $1 each time even if you win all your trades? If you actually, trade or invest in the stockmarket, you would know that risk is real. That you can lose 100% of your monies. In some cases, you can lose more than all your monies and still owe your broker monies. Nobody owes you anything and you better know what the hell you are doing or stay out of the stockmarket, for your own good. As anything in life, it is about the percentages. If you have a trading a edge in the stockmarket, you will come out ahead as long as you put out a number of trades to take advantage of that edge. As for technical analysis, if a chart pattern works say 48% of the time, is it useless? What if each time the chart pattern works, it returns 50% and when it does not, you only lose 10%. Is technical analysis still worthless?
Again, the charts by itself is only a tool. You cannot predict what will happen next 100% and more so, the government. However, even politicians tell you what they are going to do most times which guides you in how to handle your life to minimize adverse effects from actions of your politicians. Now, we come to the topic of trends. I was debating ET trolls about a month ago and they were saying trends do not work. Now, you can pick out any stockchart of your choice and just look the trends in the past 6 months, past 1 year, past 5 years. Don't you notice that trends for the most part, persist? When you look at the longer term, trends last longer than most people think. Now, where is the value in that? Again, if you can just follow the trend, would that not put the odds in your favor, of making monies?
Well if you have such a pattern(50% return and 48% win rate?), congrats to you. Most academics actually think it’s impossible to consistently predict the market. Also majority of traders are not even successful. Some quant firms develop systems to try every single combination of trading ideas(chart patterns included) that exist. Some every use weather patterns for forecasting. The market is a zero sum game, I can’t see this patterns lasting for long. Now to think head and shoulders, double top or cup and balls pattern or whatever other pattern would work and always will, looks like BS. Well at the end of the day just my opinion. I don’t troll or whatever, just trying to look at things logically.
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Most academics ......... are academics.
If you put much faith in their opinions good luck figuring trading out. Ever.
A lot of traders, even here at ET, trade without an edge. They follow hunches, they follow what other ET trolls tell them. When you are trading with negative expectation, it is like going into a Las Vegas casino to gamble. Now, common sense should tell you, whatever game you play, you will lose as the casinos have the edge on you percentage wise. Their edge could be as little as 1.54% at blackjack but, over the long haul, they will still take all your monies. As for academics, how many of them actually, trade or invest in the stockmarket? Even elite colleges have so called experts investing their monies and a number of them lose monies, lots of it, most years. I am a self-taught trader and everything I know now, I learned all by myself. I lost monies like every other trader but, I learned from my mistakes. Now, even a buy and hold investor as yourself should realize, that technical analysis and trends have a huge impact and value to your investments. If you are not using it or learning to use it, you are at a huge disadvantage. That is the reality. I use technical analysis as well as some of the best traders on ET. They know its value. Others do not which is fine. Life is about choices.
A bull or bear flag is really just buying or selling a dip. A triangle is kind of like buying a dip on volatility.
There are enough human traders in the markets that big round numbers are favored for levels. Nothing is more indicative of that bias than the total arbitrary obsession society has with people with a net worth of $1,000,000,000.
When people say TA is bullshit I don't think they are thinking very deeply about what they are even saying. To me it sounds like they are saying "Price going down is predictive of price going up is obvious bullshit", obviously.
The real comical thing is people will shit on TA and in the same breath talk about buying under priced stocks based on a discounted cash flow valuation. As if discounting future cash flows is some kind of science and not just as much fortune telling.
There are enough human traders in the markets that big round numbers are favored for levels. Nothing is more indicative of that bias than the total arbitrary obsession society has with people with a net worth of $1,000,000,000.
When people say TA is bullshit I don't think they are thinking very deeply about what they are even saying. To me it sounds like they are saying "Price going down is predictive of price going up is obvious bullshit", obviously.
The real comical thing is people will shit on TA and in the same breath talk about buying under priced stocks based on a discounted cash flow valuation. As if discounting future cash flows is some kind of science and not just as much fortune telling.
The stock market is not a zero sum game. It is quite possible for all investors to make money or lose money on any given day. That cannot happen in a zero sum game.
Indeed you are right. Even fundamentals or whatever other analysis seems to be useless. The point is that someone those other analysis methods like sentiments or order flow might make some logical sense(although may not be profitable). However chart patterns of the past predicting the future just seems odd. But then again who knows? Maybe it works.
The only strategy that seems to be almost always at the top over a long period of time is buying and holding the market index.
